Investors are worried Samsung will become a victim of its own success

Employees
make their way to work at the Samsung factory in Thai Nguyen
province, north of Hanoi, Vietnam.Reuters/Nguyen Huy Kham

SEOUL (Reuters) - Even as Samsung Electronics Co Ltd is poised to
deliver a surge in earnings to an all-time high this year, some
investors are already starting to fret the tech giant will soon
become a victim of its own success.

With a market capitalization of 331 trillion won ($293 billion),
the South Korean firm has emerged as Asia's most valuable company
and its shares have jumped 60 percent since end-2015, hitting a
record high in late March.

The outlook is upbeat with analysts seeing high chip prices
continuing at least through to the end of this year, and the
launch of a new flagship smartphone this month reviving its
mobile business after last year's Galaxy Note 7 fires.

But the stock is losing steam, up just 3 percent so far in April,
and some investors are questioning the company's long-term growth
potential and whether it can maintain the double-digit profit
growth expected this year.

"People are starting to worry whether Samsung can repeat these
kinds of numbers next year," said Park Jung-hoon, fund manager at
HDC Asset Management. "There's no reason to be the first to jump
off, but those worries will grow as time passes."

Samsung's operating profit is expected to grow just 5.5 percent
next year compared to 61 percent in 2017, according to the
average forecast from a Thomson Reuters survey of 16 analysts.

Short Memory

The driver of Samsung's rally has been the booming memory chip
market, with prices for both DRAM and NAND chips soaring as
suppliers scramble to meet demand for more firepower from mobile
devices and data servers. Researcher IHS expects 2017 memory
industry revenues to leap 32 percent to a record $104 billion
this year.

But this growth will not be repeated, analysts say, with more
production capacity coming online to alleviate the bottleneck.
IHS projects 2018 memory industry revenue to grow by just 3
percent to $107 billion.

There is also concern product makers could reach "pricing
fatigue" and maintain current chip capacity for new products
instead of adding more.

"It feels like we might be reaching a little bit of that right
now (for DRAM)," IHS analyst Mike Howard said during a Seoul
media briefing earlier this month.

Business Insider/Jeff Dunn

Meanwhile, Samsung has missed out on a flurry of deals in the
global chip industry, and the group is unlikely to join the party
any time soon as management deals with a damaging corruption
scandal that has rocked South Korean politics.

Company scion Jay Y. Lee was arrested in February and is on trial
on charges of bribing ousted South Korean president Park
Geun-hye. He denies any wrongdoing.

The leadership vacuum will temper investors' hopes for strategic
moves that could deliver new near-term growth drivers.

"We're basically going to see the chip profit double this year
from 2016 and people will start considering whether that can be
matched next year," HDC's Park said.

To be sure, no investors or analysts are expecting Samsung shares
to crash.

The firm trades at a forward price-to-earnings ratio of 8.62,
according to data compiled by Thomson Reuters, still undervalued
compared to 14.61 for smartphone rival Apple Inc and 12.55 for
chipmaker Intel Corp .

It plans to buy back and cancel 9.3 trillion won in shares, which
will support the share price and boost yields.

Business Insider/Antonio
Villas-Boas

Extra payouts or buybacks are possible given the likelihood of
record profits, further supporting shares, IBK Asset Management
fund manager Kim Hyun-su said.

Samsung said on Thursday pre-orders for its flagship Galaxy S8
smartphone have exceeded those of its predecessor S7, suggesting
many consumers were unfazed by the Note 7 fires.

(Reporting by Se Young Lee; Editing by Miyoung Kim and Stephen
Coates)